E149: How to Pick the Best Insurance Company to Empower Infinite Banking Now

In this episode, we answer the question, “what is the best insurance company to use when practicing infinite banking?”

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Topics Discussed:

  • The variables to consider for an optimal outcome
  • How to judge and why to be wary of biases
  • Understanding what’s really important during the decision-making process
  • Why do policy options change so often
  • How to read the A rating group tea leaves
  • What to look for and know about the importance of illustrations
  • How to compare policy illustrations objectively
  • Knowing how not to be misdirected by dividend rates
  • Is it ok to have multiple policies with multiple companies?
  • Judging the PUA flexibility and what that means to you

Episode Resources:

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Podcast transcript for E149: How to pick the best insurance company for infinite banking

Nate: In this episode, we answer the question what is the best insurance company to use when practicing infinite banking? She’s Holly and she helps people find financial freedom.

Holly: He’s Nate. He makes sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Nate: All right. Well, we’ve got a fun topic today, Holly, something that we’re definitely looking forward to answering. I think we’ve talked about this before on the show, but it’s definitely a question that I think can be revisited as time goes on because it’s a question that plenty of people in the banking community will have. So if you’re new to the show and new to the concept of infinite banking, welcome. I’m sure this question has come across your mind, but even for those that have been practicing IBC, infinite banking, for years I’m sure the question is cropped up and either has been answered or is still wandering around there, which is, well, how do we really know what the best insurance company is to use whenever you’re trying to practice IBC? And I’d also mention, Holly, before we dive in, if anyone has ever heard this question answered, they probably already have some vibes of what we’re going to say.

I don’t really mean to be markety or click baby in any sort of way, but I do think, sorry, to spoil the fun, I’ll just say at the outset and then we’ll dive into all the reasons why, but at the outset it’s actually impossible to truly find out what is the best insurance company to use when practicing infinite banking. But there are different variables at play that may sway a decision towards or against certain companies based on your own specific situation, at least that’s how I see it.

And so that’s really what we’re going to try to uncover today, what to stay away from whenever you’re determining, there are some things you’ll read online or watch on YouTube or something like that that will describe certain things that you have to look out for, you have to do that honestly are way overplayed and it’s a very biased rationale normally with a group or an agent who has planted a flag on some side of an aisle and says, “This is the hill I’m going to die on and it has to look exactly like this. And I got the only company that does this.” And I think that’s a very foolish way to live life and to react in this world. So the true answer is there is no best insurance company for infinite banking. Sorry for all of you out there who are hoping that I would have the best. If anyone says there is a best, run for the hills, they’re extremely biased, but there are some things to keep in mind and some things to get out of your mind when you’re trying to figure out what’s best.

Holly: And I think, Nate, to the reason why we want to emphasize the fact that there’s not a best company, is that it’s the same belief you shouldn’t put all your eggs in one basket. So you want diversity even with your policies, but the other thing is that at any given point in time, nobody can predict what’s going to happen in the future, which is one of the things we’re going to talk about. So just because that company looks good today, doesn’t mean it’s going to be the best next year, five years from now, 10 years or 15 years from now, just because they’re one of the big three today, doesn’t mean that’s where they’re going to be tomorrow or that something isn’t going to happen. So lots of things can change within the insurance company or the industry depending on how the company is ran and operated.

So it can look really good today, but we don’t have hindsight to see what it’s going to look like 20 years from now to say, “Oh, yeah, we made the best choice possible.” The decision really, in my viewpoint, is you need to get started in order to be in control of your money and your finances, and you should start with what you are comfortable doing, but asking some of these questions we’re going to talk about so you know is this a good choice or not. I don’t think we’re pro one company versus another one, it’s more what are your needs, exactly like you said, and how do you want to use this policy and maximize what you can do?

Nate: The best way to figure out what’s best for you is to really work with a team that’s got plenty of different insurances they can write for and to lay some things out. But I guess maybe if we want to start, when you’re going through the process, maybe some things to steer clear from, based on your own perspective. So as you enter into this world, and I know there’s a lot of noise in the infinite banking world where this is a very salesy markety conversation for most advisors, because essentially they may have planted a flag with certain interns companies that they really like, and they are going to try to convince you that their company is the best, or whatever it is, and it’s very common thing to do for some reason, I would say steer clear from that, because the one perspective that I find people get stuck in that they really shouldn’t be stuck in.

And that is that they put too much emphasis on making the right choice when it comes to the insurance companies. So they essentially make it they actually get their eyes off of the vision of what life looks like while practicing infinite banking and they essentially boil it all down to the only way this is going to work for me or not is to making sure I have the very best insurance company. And it becomes the end all be all or I have to investigate every single mutual life insurance company, run illustrations and policy ideas with every single one, and that somehow I can objectively come to a conclusion on which one is best. I think that is a wrong perspective because, once again, it is impossible to determine which insurance company is going to be best over the next 10, 20, 30, 40, 50 years of life. It’s impossible.

So that’s why I say I don’t want to discourage from the idea, because I do believe that some insurance companies likely are better than others. I really do believe that, so I don’t want to say that you could use any insurance company you want, do anything you want and it’s always going to work out great. No. That goes to a certain extent. But if you put so much emphasis on choosing the right company, you’ll end up wasting a lot of time because you’re essentially trying to answer a question that’s impossible to answer. So Holly, that’s one perspective I would lean against doing that I find a lot of people do is they put too much emphasis on which insurance company is being used to begin with.

Secondly, they also will put too much emphasis on looking at policy illustrations and comparing policy illustrations from one company to another and say this company’s illustration looks like this, this company’s illustration looks like this, and they essentially are going to pick the one that shows the highest numbers. Once again, you cannot put too much emphasis on numbers on an illustration page because each year insurance companies will come out with illustrations, and every year, Holly, you and I could run illustrations with every mutual life insurance company for every age and every gender and every health class, and we could come to some sort of conclusion that this company for this person at this age and this health status, this would be the best. And we could create this awesome spreadsheet, hierarchy, data sheet. We could do that.

Holly: Next year, they’re all going [inaudible 00:07:46]

Nate: And next year the hierarchy will be different whenever companies announce new dividend scales every single year. And so the dividend amounts may change and suddenly another company will look, and then you could do the same thing next year. And what we’re trying to paint is that there is value in looking at what policies look like. There is value in choosing a good solid mutual company. But if you put too much emphasis, you will let something drive a decision based on something that you might feel is objective when it’s actually completely not objective at all.

The only way to know which insurance company is best is to be able to time travel 30 or 40 years down the line and look back in hindsight. That’s the only way to do it. I guess, to start off this podcast, I’d really just try to emphasize or encourage someone to not put too much emphasis on this belief system that the insurance company is the greatest determiner of my success practicing infinite banking. Because I think if that is your emphasis, you could easily get deceived pretty easily and get suckered pretty easily, and I think it’s an impossible question to answer.

Holly: And I think too, Nate, when we think about, number one, just which one is the best, I’m going to say this, you probably want to look at a company that’s in that A rating group when you’re picking a mutual company, but the illustration, there is so many variables to companies and illustrations and you have to recognize we’re doing this to be our own bank. And one of the things that illustrations doesn’t ever typically show you is whether you take a loan out or not. All it’s showing you is what it’s supposed to do if you do nothing and you just park your money and leave it there. That’s really all it’s showing you. It’s not showing you whether you put any more money in, if you pay a lesser premium, all of those variables change the illustration. So the reality is that what you see when you first get it will look different a year from now with any company you choose. It doesn’t matter the company. That illustration will look different than the original illustration you were given.

Nate: The illustrations are always based on the current dividend scale for whatever year that the policy illustration was being printed on. Sometimes it might happen to stay the same for companies for a couple of years, that’s great, but I’m just saying, they will certainly fluctuate over time and so the dividends you receive are not just going to be a static number. Sometimes they’ll go up for some companies. Sometimes they’ll go down for some companies. Sometimes they’ll stay the same. But since the illustration itself is meant to paint just an example for what it would look like if things stayed the same, we all know they’re not going to stay the same, so this is why we put some value on illustrations, which I think I can dive into here too, Holly, how to really see that.

They do put some value to it, but they cannot be the end all be all. So when I got started about 10 years ago in the infinite banking world, so I’ve been doing it for about 10 years, I brought up a hypothetical example, Holly, of being able to build a spreadsheet with every illustration from every mutual life insurance company that you would use infinite banking for ,the hierarchy of which policies are performing the best based on the current illustrations would be way different. I want to make sure we emphasize that, hey, things change, things move around, it would have been impossible to know which one is actually going to perform the best. I hope this doesn’t discourage people though. I’m actually trying to help people be encouraged, by the way, because the end result of this is that there are a lot of mutual life insurance companies that you can use that are going to perform very well and you’re going to love being a part of it.

That is the end result of this discussion. In other words, there’s not just one whose leaps bounds better than the other. So what I’ve found is that with illustrations, I keep bringing up you can’t put too much emphasis on the numbers on the page and compare, but I would say, Holly, that there are some policies offered by some mutual life insurance companies that simply just don’t look that good. And so I’m simply saying I personally have been devoted to only recommending policies that I personally would buy at this moment in time. That’s what I do. And I think that’s a fair thing. I know a lot more about insurance than the average consumer who’s trying to get started in the infant banking does, I’m recommending a policy I would work with and that I already own, essentially what I’m trying to say.

But besides that, what I’m saying is some companies, some mutual life insurance companies, their policies don’t really look that great, and so I personally think that there would be better options in the current environment than some specific companies, but those are actually few and far between is the end result of that discussion. In other words, there are some policies issued by some insurance companies that I do know some people are using for infinite bank. I’m sure they’re happy. What I’m trying to say is the illustration does have some value. You can glean certain things from an illustration, but you can’t make it be your end all be all. There’s probably five or six mutual life insurance companies right now that are very competitive, that are really rocking and rolling that you could certainly use and be super happy with, and there’s probably another three or four that would just be okay.

None of them would technically be bad. So I know some people maybe take that to too far of an extreme where they say, “The illustration means everything. I got to choose whatever company offers me the best illustration, that’s who I’m going to use.” And then there’s people on the other side of the camp who I do know they’re selling policies that really just don’t look that good, and there could be a few reasons why they don’t look that good, but they don’t look that good but they’re selling them and they’re just saying, “Well, the illustrations don’t matter. Just choose the good mutual life insurance company.” And I’m just saying, “Hey, these are two ends of a spectrum. They’re the far extreme groups that I think both of them are being biased for whatever reason or they’re misguided, and that the middle ground is probably a safer place to be where, Hey, we’re not going to put too much emphasis on illustrations, but we’re also not going to ignore them completely. There’s got to be a middle ground here when determining which policy to use.”

Holly: I think the key here is exactly what you said, that bias point, because I’ve had individuals that weren’t clients that have come to me and shown me an excellent illustration with a company I might not be working with and I’ve actually told the individual, “I would buy that policy. This looks good. It’s set up right. It looks good. It works for what you want. And I can’t offer that to you. You should go ahead and buy it.” Yes, I’m losing the business. Am I benefiting the fact that they offered something better to the individual than I could give them? Yes, but it looked better than what I could offer. Now, the moral of that story is the client actually came back and worked with Living Wealth because we were willing to say, “It’s a good policy. It’s something I would buy,” based off that illustration.

Nate: I think you bring up a good point, Holly, too is that I don’t really see myself trying to compete. I hope no one listening to this puts me in that position where you bring a policy from somebody else and says, “Here’s this policy that this guy gave me. Can you beat it, Nate?” No, I don’t want to. If it’s a good policy… As I said, there’s probably six different mutual life insurance companies that really you could work with and be happy with. Absolutely great. And it would be impossible to know which one’s going to be better. There’s a few that I probably wouldn’t work with. And I could give you some reasons why, but certainly for the vast majority of them they’re all great.

Please don’t ask me to compete. Don’t ask me, “Nate, can you give me better policy than this? Is this the right company to use?” The answer’s yes. It’s going to be great. So I think that’s a good point, Holly, they come and bring up. That’s what we’re going to tell them a lot of the time, unless it’s not that good, it’s from one of the few that really just aren’t performing that well, or if it’s possibly a very poorly designed policy, in other words there’s not adequate paid up edition writer premium and so forth, then we might make some observations, but that may be more the agent’s fault, not the wrong insurance company fault.

Holly: And I’m going to say that sometimes the illustration doesn’t look good, Nate, because it wasn’t designed correctly. And that’s why it doesn’t look good. But sometimes, and once you’re, I’m going to say, in the infinite banking world or you’ve purchased a policy, you start understanding what you’re trying to look at. And the numbers on the page, if they don’t look as good as other stuff you’ve seen, sometimes it’s either the design, or like Nate said, it’s just a company maybe you shouldn’t be buying a policy with for whatever reason. There’s a very few and far between I’ve said, “I wouldn’t purchase a policy from them,” but there are others where I definitely have said, “It doesn’t look good and here’s why.’

Nate: Yeah, exactly right.

Holly: And so I think those are questions. If you don’t know whether it looks good or not, you need to start asking some more questions of the design or why. And those questions, we don’t have time to go into all the questions you need to be asking. I think it’s another episode, but when you’re looking at an illustration, you should be able to understand the numbers that you’re looking at and that over time it is performing well. And what I mean by that is that you’re putting in cash based premium and there is more cash growing in that than what you’ve put in. And if that never happens, then you probably have an issue with the design or the company itself. I’m going to say that you don’t want to wait 20 years down the road and put in so much money and you still don’t have more cash to borrow out than what you put in.

Nate: That’s right.

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Nate: One other thing I would note too is that there’s this ongoing topic, especially in online world, and I’m saying if people are bringing this stuff up, by the way, what I’m about to bring up, they’re trying to paint a picture that is not based on reality. Once again, that’s the issue with illustrations, a lot of the times it’s the issue with choosing the right company. You only got to work with companies I got a flag planted in. The same thing is true with dividend rates though, Holly. Every year an insurance company will announce a dividend rate. And so I know some people in the online world are saying you got to go with the companies that have great dividend rates today, or maybe they have great dividend rates historically, or all these other things as if the dividend rate declared by the insurance company is the end all be all determiner of what the best company is.

Once again, that is a facade, that is not real, because a dividend rate does not predict policy performance in a perfect world. So there are some companies that have announced lower dividend rates than others, but yet the policy cash values in their policies are growing more rapidly than the other companies with higher dividend rates. I bring this up merely to say anybody who tells you that dividend rates are a real accurate objective picture of policy performance, they are either deceived or lying. That’s just the truth. They believe a lie or they are lying, because dividend rates, they do impact things. Once again, I’m saying that if you are on either side of the extreme, you’re wrong. If you’re saying they don’t impact anything, you’re wrong. If you say they determine actual policy performance and they’re a great indicator of which company’s going to perform better, you’re wrong.

That’s just not actually how it works. There’s a middle ground. They do have a place in the discussion, but, once again, you cannot overemphasize published dividend rates and assume that the ones with higher dividend rates are actually producing higher cash value performance. That’s just not true. It’s not how it works. There’s a whole bunch of things going on inside a dividend rate that has to make its way into your policy cash values that doesn’t take into account guaranteed growth and so forth. There’s so many different variables involved that you cannot just take one of them and say, “Yeah, this is what it is.” I guess we’ve pushed down the wrong perspectives when determining we could switch over a little bit toward what we recommend in some ways, or at least some things that would be good perspectives.

Number one, we’ve already brought this up a little bit, because of the ambiguity that exists, because it’s not black and white, we oftentimes will recommend people over time, as they practice infinite banking, they end up having multiple companies where you own policies, not just with one company the entire time, but likely own policies with a few different insurance companies over time. Now, obviously that assumes you start new policies, Holly, which is just a very normal thing to happen inside of the infinite banking world. If you’re actually practicing the system the way it’s supposed to be practiced, it’s likely you’ll end up with multiple policies over time. And when you do that, it wouldn’t be the end of the world to keep them all at the same company. Once again, I’m just saying that oftentimes I will recommend having at least two companies involved if possible, because it’s impossible to know which company is going to perform the very best for the next 50 years of life.

So me personally, I think I’ve got five insurance companies. I’ve got 10 policies total, five different insurance companies represented, and I love them all. I wouldn’t trade them away for anything else. So I hope people understand that obviously we practically what we preach. I do not commit to one. I don’t have a flag planted with one insurance company. I may have some preferences based on new policy designs that have come out and so forth, but once again, there’s so many great ones out there. So first off we’d recommend having some policies with different companies as time goes on. And partly the reason for that is some companies are better at some things than they are at others. Some companies do things differently than other companies and it’s not bad, it’s not good per se. They will all have their own little quirks. And we could dive into a little bit of some variables that each insurance company might offer that others don’t and so forth.

Holly: Well, one of those quirks, Nate, is just like you having multiple companies, some companies have very flexible paid up edition riders, whether it means you can put in money anytime throughout the year is cash, whether it means you can change that, and the flexibility of it, you can design it to put maximum in, but you don’t have to, and minimum amounts can be different too. Each company might have a different minimum amount. It just depends on that if you want something flexible or there’s some that’s what you put in and you can only put it in on your anniversary date and you can’t do anything else other than that.

Nate: Some companies have great policies, they look awesome, but it’s true that the paid up edition writers might not be the most flexible writer. You have to fit certain schedules with very little changes available, whereas other companies, honestly, there’s plenty companies that might have an average, bland, middle of the road, plain vanilla looking policy, but man, their paid up edition writer is so flexible. You can move it around. You can put as much up to the [inaudible 00:23:55] as you want any given year, you can reduce it down to practically zero, you can move it around all the time. And then there’s some companies that have a bit of [inaudible 00:24:02], they’re great, their policies look great and they’re flexible, but I’m just simply saying this is a thing, PUA flexibility, that that is important.

We have people planting flags and different opinions where they say even though they don’t have flexible PUA, it’s still the greatest company. Other people say, “Well, my company’s got a super flexible PUA and that’s why everyone should write with mine.” Once again, that’s foolish, don’t believe. That is a biased perspective that tries to paint a picture of black and white objectivity on something that’s absolutely not. It’s not the end of the world to have a PUA writer that’s not very flexible. I have policies that have PUA writers that are not flexible. I have policies that have super flexible PUA’s. I love them both. Once again, I don’t think that should be the end all be all, but that’s something to consider. There’s also some companies have different policy loan rates, it should not be the end all be all.

How could you compare objectively a policy illustration presented to you from one insurance company to another, or compare companies knowing that, hey, when we’re going to borrow money it’d different loan rates. Once again, don’t overemphasize these things. We’re just bringing up the idea that there’s a whole bunch of mutual life insurance companies, six or seven really, you could work with and it would be great. It really would, but maybe you should consider having policy with multiple insurance companies over time, I think that’s going to be best, because there’s different variables at each. Some are direct recognition. Some are non-direct recognition on how they treat policy loans. That would be another thing. Once again, that’s not an end all be all. And if you have planted a flag in one world or the other, because some people plant flags in the non-direct recognition world, there’s other people who plant flags in the direct recognition world, and they’re fighting with each other.

I’m saying that should not be the end all be all. We actually did a podcast episode that deep dived that specific question, by the way. So if anyone’s listening to this and they want to go review that episode, that’s episode 102. So you can go back and listen to that to get a deep dive into the difference between those two. All of this to be said, I know we spent a ton of time on this already, Holly, it’s impossible to know for sure which insurance company is going to be the best.

There are some things and there are some perspectives that you will Google stuff, you’ll watch YouTube videos, and there’s people in camp where they planted their flags in different sides of the aisle, and they’re arguing and bickering with each other, calling each other wrong. When I’m sitting here in the middle thinking you guys are both wrong and right at the same time, but you guys are arguing essentially your opinion on which pro and which con is better or worse and should then paint a picture of what company to use. So there’s so many different variables it’s impossible to know which one is exactly the best. So I guess to sum it up, Holly, it’s likely you’ll have success with an insurance company that’s been around for a long time.,That’s weathered all the storms. It’s 100 years old or older, that’s paid dividends every single year for the last 100 years without missing a single year, that’s got good financial ratings, not in any sort of financial trouble, A ratings and stuff like that.

One that’s IBC friendly as well. So there’s a few companies out there, Northwestern Mutual, who’s not IBC friendly and their agents really are not supposed to promote it, and so forth. So there’s a couple companies out there, I don’t even know if I would say they have to be IBC friendly, but they should certainly not be antagonistic towards those who practice infinite banking. We call those IBC friendly companies. And I would point one little caveat with an asterisk that I do think that the policies themselves, as seen on the illustrations, should be relatively competitive. I don’t think that should be the end game. There’s plenty of companies that have competitive policies, but I am saying there are some select few who you look at the policies themselves and you think to yourself this is not really that great, I don’t know why I would choose this one right now. I do want to add that in that you do want to have a policy that’s relatively competitive, but don’t get so caught up and overemphasize it and bring it to a place of a status where it should not be.

Holly: If you’re not sure what you’re looking at and you don’t feel like the agent can answer your questions or explain it, reach out and ask for help. The one thing I would hate for any of you to do is to buy or purchase a policy that you don’t even understand what you’re doing or why you’re doing it. If you don’t understand the illustration and it hasn’t been explained to you, or you don’t understand why you’re doing what you’re doing or what you’re looking at, ask for help.

Nate: And I really actually did, by the way, Holly want this podcast to be an encouragement. The end result is if you have a well designed policy with sufficient paid up edition writers premium with the vast majority of mutual life insurance companies, you are going to have a good policy and you’re going to be able to use it for infinite banking and you’re going to be very happy with it. That is the end result. I guess what I’m pushing back on is a lot of the agents and advisors that exist that are essentially promoting their biased opinions and saying we know the only real true answer to what the best insurance company is based on our set of requirements or whatever it is. They’re not being fair. So don’t emphasize too much the insurance company, though, at the end of the day, it’s not unfair to make sure that the policies you are working with are actually very competitive.

Because as I said, there’s probably three or four mutual companies out there right now that I know some people are using and it honestly wouldn’t even be the end of the world. I’m just curious why an advisor would choose those, because they can look at the policies and see that, hey, maybe it’s not the greatest of all time. To my knowledge though, Holly, there’s only one or two companies that I really just would totally stay away from. I’m not going to name names on the podcast right now, but there’s a couple that would stay away from just because I don’t think they perform well. I’m not sure why the advisors use those, but besides that, do not make the emphasis and your perspective be, hey, if I choose the best insurance company, I’ll be successful.

How you manage the system, how much money you devote to premium, how maneuverable you are in the system, how much you grow the system based on your own ability to fund and move money around and advance strategies you can implement, that’s honestly going to have a greater impact than the insurance company itself as long as the policy itself is a competitive policy to begin with. What I’m saying is it’s going to be few and far between where it’s not. The vast majority of mutual insurance companies are great at practicing infinite banking.

Well, it’s been great to have you guys. I hope we did not discourage anybody or produce uncertainty. The end result really was to encourage the listeners that, hey, if you are working with a good mutual company that’s got competitive policies, it’s been around for a long time, it’s highly rated, you’re going to be in great shape. Don’t worry so much about whether it’s the perfect company or not. And anybody who tries to tell you, looking at illustration, that this other company is the best is wrong, because things will change. So be confident with what you have, find an advisor that you can trust and that you would like to work with. Choose them, do any relative due diligence you would want to make sure that the policy’s not a part of the uncompetitive crowd and move forward. It’s going to be great. But with all that being said, this is Dollars and Nonsense. If you follow the herd, you will get slaughtered

Holly: For free transcripts and resources, please visit livingwealth.com/e149.

Announcer: Listeners, one last thing before you go. Start your journey towards financial security and wealth today, visit livingwealth.com/beatinflation. You’ll gain instant free access to the beginner’s course Ray, Nate and Holly made just for you. Again, that’s livingwealth.com/beatinflation.